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39 comments on Winchester Lets Brown Have Both Barrels
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Those who read Tony Mackay's piece on oil prices will get a different insight from an economist with business interests in Saudi Arabia. I agree with some but not all of what he has to say here.
Mackay had this to say:
As the chart from Stuart Staniford shows, sharply rising demand since 2002 hit a production plateau in May 2005, and IMO since then we have been seeing demand destruction, as demand outstripped supply and prices have gone through the roof.
This I believe provides down side protection on the oil price, since if prices fall those priced out may re-enter the market and bolster demand.
I agree with Mckay, however, that OPEC would defend $75 per barrel with production cuts and that the activity of speculators muddies the issus.
We do know pretty much where the reactors will be built.
There are not that many sites to choose from, as they are trying to use existing sites or Sellafield to reduce operation, and existing cables to take away the power give a lot of priority to some places. It can't be in Scotland and is unlikely to be in Wales due to hassles with getting it through their parliaments, and ideally you want somewhere where you can site two large reactors.
So they have come up with a site preference list, with Hinkley point and Sizewell at the top, then Bradwell, Dungeness, Hunterton (unlikely as it is in Scotland) Hartlepool, and Torness (Scotland)
More here:
http://www.berr.gov.uk/files/file39030.pdf
file39030.pdf
I do not believe the speculators angle at all. Speculators are selling as much oil as they are buying - the net impact on the market is zero. It is the people who buy and do NOT sell who are driving prices up; and it is these people who are buying oil to supply refineries.
Are you saying we buy oil and then destroy it? Surely not. No economy could survive that;-)
When we use oil for a fantasy flight all we have left is the memory of the flight of fantasy we enjoyed - perhaps in Las Vegas or Bangkok.
Here is a March 2007 study from the Oxford Institute for Energy Studies that specifically looked at the question of whether speculators cause high energy prices: http://www.oxfordenergy.org/pdfs/WPM32.pdf
Their conclusion is that there is no correlation whatsoever between speculator activity and higher energy prices.
There is a great chart on p. 36 of the report that tracks net long speculative positions against oil prices. As you will see if you look at the chart, there is no correlation between net spec long positions and prices. Speculators are as likely to be net short when prices are rising as they are to be net long. They are as likely to be "improperly" holding back energy prices as "improperly" pushing them up.
The entire issue is a canard that was brought back from the dead most recently by Alan Greenspan in, I believe, 2005, when he sought to evade responsibility for his inflationary fed policies by blaming higher energy costs on speculators.